House keeps flood insurance program going during hurricane season, but will Senate follow?

Congress faces a July 31 deadline to extend the National Flood Insurance Program or the agency that runs it, the Federal Emergency Management Agency, will not be able to issue new policies and home sales in flood-prone areas could be frozen.
Herb Jackson/NorthJersey.com

Homes on 10 Wayne streets including Fayette Avenue, shown here during a 2011 flood, were scheduled to be purchased and razed using $2.4 million in FEMA funding, officials said.(Photo: Tariq Zehawi/NorthJersey.com)

WASHINGTON — Days before members leave town for a monthlong recess to campaign for re-election, the House voted to keep the National Flood Insurance Program operating during hurricane season.

But it is unclear whether whether the Senate will follow through before the July 31 deadline to reauthorize the program.

Letting the program lapse would mean the Federal Emergency Management Agency could not issue new policies, which would prevent homes in flood-prone areas from being sold, because insurance is required by mortgage lenders. It also could mean FEMA would not have the money to pay the claims of existing policyholders if there's a major disaster and it has to borrow more than $1 billion.

Having to tap a federal credit line after Superstorm Sandy in 2012 and severe storms in 2005 and last year left the flood program with $21 billion in debt, even after Congress forgave another $16 billion in borrowing last year.

It means that along with paying claims and the commissions earned by private insurers that sell FEMA-backed policies, the program has to pay about $400 million a year in interest to the government.

Nationwide, about 5 million properties have federally backed insurance, most of it sold by commercial insurers. New Jersey has the fifth-highest number of policies, with about 230,000.

Rep. Tom MacArthur, R-Toms River, sponsored the bill to extend the program through Nov. 30 even though he said he wanted broader reform and was frustrated the Senate had not taken any action since the House passed a five-year extension last October.

He argued for the bill's passage Tuesday night in opposition to Rep. Jeb Hensarling, R-Texas, the chairman of the House Financial Services Committee, who said that after six short-term extensions, he could not support another one.

"This is a program that continues to be in dire need of reform," Hensarling said. "Enough is enough."

MacArthur said in an interview that Hensarling was trying to let the program expire so he would have more leverage in discussions over a larger bill.

During floor debate, MacArthur said the program's $30 billion borrowing authority would drop to $1 billion if there is a lapse in the authorization.

"That’s a modest event in this country. How do we look the American people in the eye after a storm and say we don’t have the money that you’ve been paying premiums for? How do we do that?" he said.

Every Democrat but one supported the bill. Six from New Jersey's delegation – Frank Pallone, Bill Pascrell, Donald Norcross, Albio Sires, Bonnie Watson Coleman and Donald Payne – issued a joint statement saying they preferred a more comprehensive measure that is sponsored in the Senate by Sen. Bob Menendez and would include subsidies for low income homeowners and cut the commissions paid to insurers.

“It’s also upsetting that members of Congress, including in the New Jersey delegation, are championing short-sighted approaches that will create further uncertainty," the Democrats said in their joint statement.

The bill passed by a 366-52 vote, meaning the vast majority of Republicans ignored the alert from the Club for Growth, a small-government advocacy group that said it would include the measure as a key vote on its congressional scorecard, which some see as a measurement of how conservative a lawmaker is.

"Rather than kick the can down the road, which this bill does, Congress needs to get the government out of the flood insurance market by repealing this program," the group said in an email to house members.

Hensarling said he did not think the Senate would take up the short-term bill. The Senate is in session next week, but if the bill does not have unanimous support, rules would allow opponents to tie the chamber up for several days on procedural votes before it could be passed. And that possibility could result in leaders focusing on other issues instead.

Rep. Steve Scalise of Louisiana, the Republican majority whip, urged his colleagues not to let the program expire.

"We can’t play some game of chicken with the lives of millions of families," Scalise said.

Members of Congress have long wanted to make changes but can't agree on what to do. Critics of big government want FEMA to get out of the insurance business, or at least to encourage more competition from private insurers.

Reformers across the spectrum want the government to deal with properties that flood repeatedly, some of which have artificially low grandfathered rates. But there is sharp disagreement about whether the government should put up money to buy them out or if premiums should just be raised to the point that owners move away.

While much of the gridlock in Congress is driven by partisan or ideological issues, the flood program is focused more on geography, with the states having the most policyholders represented by both Democrats and Republicans. Indeed, the No. 1 state, Florida, has one senator from each party.